Release Date: August 15, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Gogoro Inc (GGR, Financial) announced two substantial investments totaling $100 million, with $75 million received in cash.
- The company entered into an MOU with Sumitomo Corp. and Sumitomo Mitsui Finance and Leasing Company to facilitate a more asset-light international expansion.
- Gogoro Inc (GGR) continues to lead the transformation of two-wheel urban transportation, expanding its leadership in Taiwan and other markets.
- The company has over 608,000 accumulated subscribers and $34.7 million in battery swapping service revenue, showing healthy revenue growth.
- Gogoro Inc (GGR) is actively developing joint strategic initiatives with Castrol, Sumitomo, and SMFL, which are expected to create new business opportunities and revenue streams.
Negative Points
- The overall Taiwan two-wheeler market is down 4.4% year-to-date, impacting Gogoro Inc (GGR)'s sales figures.
- The high sales volume of the JEGO model resulted in a lower average selling price and consequently, lower overall revenue.
- Gogoro Inc (GGR) is still operating at a loss and investing heavily for growth, which requires substantial capital and operational spending.
- The delay in the finalization of India's FAME III subsidy policy has pushed expected revenue from India to 2025.
- Gross margin declined to 5.2% from 15.2% in the same quarter last year, primarily due to derecognition expenses, increased depreciation, and a decrease in ASP.
Q & A Highlights
Q: What is your plan to capture additional market share and volume in the second half of 2024 in Taiwan? What about international markets?
A: The overall Taiwan market was down 4.4% in the first half of the year from 2023, impacting our sales figures. Our JEGO and Pulse vehicles are being positively received in the marketplace, and we have 6,500 backlog orders of the vehicles at the end of Q2. We're planning to deliver all the backlog of vehicles by the end of the year and expect the Pulse and JEGO momentum to continue. We have launched a marketing campaign for JEGO recently and are actively engaging in traditional summer and back-to-school promotions to sustain excitement around these new vehicles. In India, much of our progress is dependent on the finalization of the India's FAME III subsidy plan and the inclusion of Battery Swapping in that plan. The delay on this initiative has delayed our India plans, so we expect most of the forecast revenue for 2024 to push out into 2025. Other international markets are performing approximately as forecasted, and we expect some additional momentum in the second half of the year as we launch services in additional countries.
Q: From the recent capital raise from Gold Sino and Castrol, could you recap your capital structure and your intention on the use of the proceeds?
A: In Q2, we received a $50 million cash injection from Gold Sino and the initial $25 million of what could become a $50 million investment from Castrol Holdings through the issuance of ordinary shares to these two investors. These funds are instrumental in fueling our ongoing commitment to our expanded Battery Swapping infrastructure and supporting our growth initiatives, both in Taiwan as well as internationally. The addition of these funds means that we have a strong balance of $196 million at the end of Q2. We also have access to additional credit facilities should we choose to exercise them. We're comfortable with our current cash position and our current debt position, and we're confident we have the financial wherewithal to meet our near-term objectives.
Q: Can you give an update on the Taiwan market outlook in the second half and the progress and expectation of the Indian market given the delays in subsidy policy?
A: In Taiwan, if you look at seasonality, typically, the second half of the year is larger than the first half of the year. With the downward trend of almost 5% in the first half of the year, we're taking a conservative stance. This is one of the main drivers of the reduction in our revenue forecast. The second biggest part is the sale of lower ASP products in Taiwan. Our JEGO vehicle has been super successful, which has brought our ASP down a little bit in the second quarter. We do anticipate ongoing ASP pressure in the second half. In India, the expectation is that within the next weeks or worst-case scenario within the next couple of months, we expect the finalization of the FAME III subsidy policy, and we do expect battery swapping vehicles to be included in that policy. However, to be conservative, we are anticipating that virtually all of the revenue that we had previously anticipated to happen in 2024 will now push out until 2025.
Q: How should we think about the commercial opportunity in Singapore in the next few years?
A: Singapore is being viewed as the leadership country in that region with many people traveling in and out with the headquarters of businesses in Singapore. It's a great way for us to demonstrate what is possible in a city as tough as Singapore. We are really focused on B2B with a little bit of B2C, but heavily on the B2B business with partners like foodpanda. More importantly for us in Singapore is to really demonstrate a smart system in the group or the cities for great countries around that region. With Singapore having the reputation of being the leadership country in that region, we're excited to work with leadership companies like Jardine Cycle & Carriage as well as Shell in Singapore.
Q: Can you talk about the margin trend in the second half? Do you see further deterioration of the gross margin in the second half of 2024?
A: The gross margin figure that we're really looking at is the adjusted gross margin figure. Last year, on the full year, our gross margin was kind of mid-double digits. In the second half, we expect to work hard to pull that number up a little bit. Typically, in the second half, we do have higher revenue associated with just seasonal uptick in sales of vehicles in Taiwan. Should that happen, then we should be able to hold the margin flat, maybe even sneak it up just a little bit. So I don't expect much margin -- further erosion in the second half of the year.
Q: If the Indian Government doesn't subsidize Battery Swapping this year, would Gogoro change its business strategy and allow customers to own and charge their batteries instead?
A: We believe in the ease of use and also as the game changer in the Battery Swapping system that we have developed. In Taiwan, before we actually launched our Gogoro battery swapping system, the electric adoption was very, very small. In India, the penetration, although with big players like Ola and others deploying vehicles with charging systems, the opportunity for Battery Swapping to make a difference in that country is great. Our vehicle today can also do Battery Swapping, it can also do charge-at-home. It's not a technical question, it's really a business model question. We do believe that battery and portability of that battery as well as the swapping of that battery is a very important part of how we're going to add our uniqueness to that market.
Q: Can you comment on the status of the battery pack factory and vehicle manufacturing capabilities in India?
A: We are 100% -- we do have 100% belief in what the Indian market can bring to Gogoro as well as what Gogoro brings to the market. Our job is to get ready for that big market. That includes getting suppliers ready, that includes getting our battery pack factory ready. But most of all, it's really about ensuring we have the right partnerships and infrastructure in place. The battery pack factory is almost ready, and the vehicle has been on the road certified and actually running. We've been running vehicles with our customers on the pilot side. But before we scale up in a gigantic way, we really want to make sure that the subsidy program is there in place to make sure that we stay competitive.
Q: Gogoro Batteries have proven it can power devices beyond mobility like smart parking meters, back power for traffic lights. Are there any plans to sell these batteries and connectors so that new devices could be developed and could be powered by Gogoro batteries?
A: Absolutely. We have had a lot of inquiries; some are great ideas. Some are a little bit
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
